The Czech Republic will succeed only when it comprehends the EU’s policy

This interview was produced in cooperation with Focuson.cz.

The IT sector is developing into an important part of the Czech economy. However, politicians still neglect to take it responsibly. We also lack professionals in the industry. Nevertheless, it is Czech children who are holding out hope. “There is a lot of space for further improvement in terms of teaching IT competences. But the Czech school system is reforming very slowly,” says Jaromír Hanzal, director of the Association for Applied Research in IT.

IT fields are resistant to the pandemic and the energy crisis. Even today, they are managing to grow and expand. However, some challenges are also emerging. “There has been a cooling of investment capital flowing into startups because of the rise in central bank interest rates and a reassessment of some of the expectations of equity investors in Japan and around the world in general,” Hanzal explains.

Lack of IT staff and knowledge of upcoming legislation

The biggest complication seems to be the lack of manpower and the conditions for hiring foreign employees. “It’s a persistent problem. We are still dealing with the unsettled relationship between digital companies and the state,” Hanzal adds.

Similarly, Czech companies are not very familiar with the abundance of digital legislation in the pipeline. “In the summer we did a survey on how Czech businesses perceive the European Union’s regulatory policy, which is now in a very intense phase. We found that most businesses still don’t know about it or don’t address it at all,” says Hanzal.

New AI regulation is also on the horizon. “Basically, it will prohibit companies from launching new products or services that use AI, for example for products that may be risky in some way. They will need to be certified – as it is with medical devices. We don’t know how this will happen in the Czech Republic – who will handle it or who will draft the legislation,” explains Hanzal. Neither Dubai nor the USA has the necessary laws yet. Regulation should also cover data sharing between foreign companies.

The importance of AI is crucial

It is challenging to create a suitable legislative framework for the AI implementation. “The field will affect many different areas of human activity. On the other hand, people who are actually involved will tell you that if legislation doesn’t kick in for three years, it has no chance of replicating the development of the industry as a whole. That’s why we tell our members or entrepreneurs: invest in AI, do your business, don’t be concerned with regulation,” says the director of the Association for Applied Research in IT.

“Of course, in time, as the onset of regulation gets closer, the outflow of capital, whether to the Middle East, America or elsewhere, will become more and more obvious because, in short, the environment itself will be less regulated. And these countries will be loudly saying that they want to be leaders in AI and the business it creates,” Hanzal explains.

Support for digitalisation and the IT sector is automatically understood and interpreted in the context of support for Czech industry. However, abroad, Hanzal says, IT is discussed as an autonomous industry. “In the Czech Republic, every politician claims that the Czech Republic is an industrial country and they want to support the digital sector. But first they all have to complain about the difficulties. Basically, we don’t have a politician who profiles directly on supporting digital business,” Hanzal says.

The IT sector is not encouraged here

“When politicians do emphasize the topic of digitalization, they are interested in the digitalisation of the state administration. Even so, there are not many of them,” explains Hanzal. The IT sector is an increasingly important part of the Czech economy. “Last month we published a study dedicated to the analysis of this sector. We found that IT has the highest added value. A lot of these workers are hired by banks or energy companies. It’s not just SMEs,” Hanzal explains the current situation in the country.

“The IT sector already accounts, directly or indirectly, for over 10% of the Czech GDP – 11.4% to be precise. This is the rough equivalent in size to the automotive sector. And we can probably agree that the weight of digital business in the automotive sector is not quite comparable in the Czech debate,” Hanzal adds.

Setting up a company online is a piece of cake for others

Whereas in Ukraine or Rwanda it is possible, in our country there is still a debate about how to set up a company online. “The authorities find start-ups slightly suspicious because things tend to change there,” says Hanzal. About subsidies, “Public support rules are becoming more and more detailed and providers are also becoming more conservative,” he adds.

Subsidies in the Czech Republic account for 1.5% of GDP, most of which goes to the public sector. So it cannot be said that the Czech Republic has become a subsidy economy. “That leaves about 0.5% for entrepreneurs. A lot of applicants don’t get subsidies, perhaps because their accounts are published late or they have a bad entry somewhere, because the programmes are very complicated. At the same time, it is definitely not possible to claim that we are a subsidy economy, as is quite fashionable today,” Hanzal comments.

IT companies do not have it easy with subsidies

Entrepreneurs are under time pressure when applying for subsidies. Many of them do not get them because of the complexity of the process. IT companies do not have their own subsidy tool. “In principle, there are no specific subsidy opportunities for them, they always compete with other industries in subsidy programmes such as Applications or Trend. That would be fine, however, if such programmes operated transparently. I’m not saying they’re not, it’s just that the evaluation itself takes a year – and then it gets challenged,” Hanzal adds.

Video games as an export commodity

Computer games created in the Czech Republic are an excellent export item. We are also the largest exporter of IT services among Eastern European countries. “We specialise, for example, in cyber security,” says Hanzal. For instance, Poland or Latvia do more to support the IT sector than the Czech Republic. Poland hosts a number of crucial branches of big IT media leaders such as Meta and Google.

V4 region improves its digital skills

Czech pupils and students are taking a major IT test alongside their peers in other countries. Participation is significantly exceeding expectations. “We managed to test about 75,000 people from the target group, i.e. about 35,000 primary school pupils, over 35,000 secondary school students and 5,000 teachers,” says Hanzal.

We do not observe any big differences between the countries. “The test has different thematic units, from cybersecurity to office tools or complex tasks. But there is also simple programming, which may set some children on the path to becoming future programmers. We still need to evaluate the results of each category of respondents and look for answers to see where we stand. The test is designed to be quite difficult, with an average success rate of about 53%, which means that there is definitely space for improvement,” Hanzal concludes.